Which Branch Of Bankruptcy Is Best To Stop A Foreclosure From Going Through?
When your mortgage lender begins the foreclosure process on your home, you may need to act quickly if you want to avoid losing it. Bankruptcy is often a good option to look into at this time, but you will need advice as to which branch of bankruptcy you should file to prevent the foreclosure from occurring. Here are several things you should know about stopping a foreclosure by filing for bankruptcy.
How Chapter 13 Stops A Foreclosure
There are two main branches of bankruptcy, and Chapter 13 is the branch that is used often to stop a foreclosure. When you file for Chapter 13, it will automatically stop the foreclosure process. You will then be placed on a plan to repay all your debts, including your mortgage. The Chapter 13 plan will allow you to repay the current principle as well as any arrears you may owe on the property. If you want to keep your house, you will be able to with a Chapter 13 plan.
What Chapter 7 Involves
There is also a chance you could save your home from foreclosure with Chapter 7, but using this branch of bankruptcy is usually harder to do. The first reason is because Chapter 7 bankruptcy does not involve a repayment plan, and this means you will not be able to work in the past-due balance of your mortgage loan into your bankruptcy. Because of this, you will have to come up with a way to pay your past-due balance in order to keep your house with a Chapter 7 bankruptcy.
A second issue you may experience with Chapter 7 bankruptcy involves the equity in your home. If you have a lot of equity in your house, the bankruptcy trustee may not allow you to keep it. With equity, a trustee would have the ability to sell the house and make a profit, and this is one of the trustee's goals when settling a Chapter 7 case.
Finally, to use Chapter 7, you will have to quality for it. To do this, you must compare your income to the median income in your state. If your income is not less than this amount, you will not be allowed to use Chapter 7.
Using Chapter 13 bankruptcy is usually the best way to avoid losing a home to foreclosure, but every case is different. To find out which option is best for you, contact a bankruptcy attorney today.